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It is one of life’s certainties that most cars depreciate in value
We have to be careful when purchasing that fun sports car, or even the one that’s supposed to be our main mode of transport between home, office and taking the kids to school.
Resale Value
Depreciation is simply the difference in market value between the original purchase price and the current value. There will come a time when we want to replace our car and nobody wants to be unprepared in terms of its resale value. And of course we want to know that the car we’re exchanging for a new one has not depreciated more than is the norm. It goes without saying that you want the best possible price for your used car when you either sell it privately or trade it in as part exchange on the new purchase.
Most experts will tell you that, on average, cars lose between 40% and 60% of their original value during the first 3 years, or between 15% and 20% each year. In fact, it starts depreciating in value the moment you drive it out of the showroom. Why? Think of the difference: wholesale price vs. retail price. When you take possession of the car it reverts back to wholesale price since, if you were to sell it back immediately to a dealer, he would have to increase the price again when he sells it to the next buyer. So, to the market the car is never worth more than its wholesale price.
Some Depreciate Faster than Others
Factors that will cause some cars to depreciate faster than others include the following:
Proper Care
Even though we all accept the inevitability of depreciation, we should not forget the basics: Minimise the effect of depreciation by doing all you can to look after your car as there will come a time when you want to sell it at the best possible price.